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Rice: The new oil?

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In recent years much attention has been paid to the rising prices of oil and commodities, much of it driven by the increasingly voracious consumption of the Chinese economy as it continues down its path toward becoming the world's largest economy.

In March and April however, rice climbed to the front of global consciousness as major rice-producing countries including India, Vietnam, Brazil and Egypt announced that they would limit rice exports in order to ensure sufficient domestic supply. Over the past few months the price of benchmark variety Thai B-grade has tripled to around US$1,000 per ton.

The decrease in supply and increase in price for imported rice has also raised concerns in Hong Kong, Singapore and the Philippines, all of which are major rice importers. The fallout has not been limited to Asia – rising rice prices have led to some North American wholesale chains limiting rice purchases as shipments of rice from Asia to North America have decreased. The jump in price also sparked riots in Haiti on April 4 that left six dead.

With rice's value to the planet increasingly visible – it is the most important crop in Asia and is the second most-grown cereal grain in the world after maize (corn) – major rice exporters are considering new ways to leverage their critical role in global food production.

On Wednesday the prime minister of Thailand, Samak Sundaravej, floated the idea of creating a cartel of rice-producing countries that could operate similarly to the Organization of Petroleum Exporting Countries (OPEC). The proposed cartel would include Thailand, Vietnam, Myanmar, Laos and Cambodia.

"We don't aspire to be like OPEC, but we hope to be just a group of five to help each other in trading rice on the world market," Bangkok-based newspaper The Nation quoted Samak as saying. Samak also told reporters that Myanmar leader General Thein Sein approved of the idea when he raised it at a meeting between the two leaders in Bangkok earlier this week. Thailand's foreign minister Noppadon Pattama said the cartel was likely to be formed during Samak's tenure as prime minister.

Successful organization of a Southeast Asian rice cartel, which is tentatively being called the Organization of Rice Exporting Countries (OREC), would have a major impact on the global rice market. Thailand is the world's biggest exporter of rice, sending around 10 million tons to international markets yearly. Vietnam – the world's second-largest rice exporter – exports roughly half that amount.

According to the Chinese government, the country's rice reserves are enough to last half a year at current consumption levels, yet fears of hoarding and further price rises in the short term are growing. Rice prices in south China have increased 10 percent in recent weeks despite frequent releases from China's state reserves to keep prices low.

Rice production is also facing a serious problem in the form of diminishing global water supplies. Conventional rice production requires large amounts of water – a fact not lost on increasingly thirsty China, which last year announced that it aims to expand its use of aerobic rice, a strain of rice that like wheat is capable of growing on dry soil. China hopes to increase its aerobic rice acreage to 30 percent of national rice acreage from its current level of one percent.

Should OREC's influence on global rice prices eventually parallel OPEC's influence on global oil prices, it is likely that the cartel will need to cultivate a friendly relationship with China, which controls the headwaters of the region's most important rivers including the Mekong and Salween rivers.

Top image: Wikipedia

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